Whats the endgame, and will Facebook be part of it?

<Disclaimer>This is going to a wonkish post. More of a brain dump on a few interesting ideas in my head, not fully flushed out by any means!</Disclaimer>

I’ve been really intrigued by the “Beyond Scarcity” series by Izabella Kaminska over at FT alphaville. The main thrust of the theory is that humanity has a certain set of needs like food, shelter, security and consumable goods i.e has a level of consumption. Throughout history there has been a scarcity of these items and mankind furiously progressed to make these items available. To grease this production of these items the concept of “money” was invented. Money facilitates the exchange of these goods better than the barter system.This is also why we have entreunpership. There was opportunity to provide humanity with things that it needed in a productive way and earn some “money”. The general public now also had to “earn money” to buy goods. Thus now everybody had to have a “job” and had to work for a living.  This general model now caused money to have a positive time value and it itself became an appreciating good. Money had to grow and therein came the concept of interest and the expectation that money should always grow in value. The flip side was the concept of inflation. Since we were still in a scarcity environment, even as more goods started coming to market, demand was still high so prices rose and inflation came into being. Also as money kept getting interest and growing in quantity, there was more money chasing fewer goods, again leading to the concept of inflation. So the need for certain goods and the scarcity of those goods, has what led to mankind creating the concepts of money, interest and inflation.

What happens when we reach a point where there is no longer a scarcity?

What happens when we are so productive that there is no longer a scarcity of goods? i.e the level of consumption has reached a plateau and the rate of creation of goods has overshot. Technology has greatly enabled this elimination of scarcity, the internet has made a lot of things available for free! The cost of producing goods is being driven lower and lower by technology as well as globalization. Thus now the  supply of goods is way more than the demand for the goods. What happens in this scenario? We start to get deflation, less money buys more goods, and thus money starts losing value and eventually we have negative real interest rates. Money becomes just another depreciating asset. This is exactly what is happening today! We live in a world of deflation and negative real interest rates! Are we approaching a condition in humanity that we have all what we need?

The other angle is the new economic theory of Modern Monetary Realism (MMR). All monetary systems that exists in earth today what we call Fiat currency models. There is no actual physical value to our money, like when the world followed the gold standard. All our money is floating on a market and has a perceived value based on what the market values it. MMR seeks to explain economic behavior via the prism of how a fiat based system operationally works. Cullen Roche has a great introduction on MMR on his website which I recommend reading. The guiding principle of progress according to MMR is stated via the MR law “We generate improving living standards through the efficient use of resources resulting in the optimization of time”. Based on the MR law – the fundamental aspect of humanity is to save time and be very efficient.

If you tie the two theories together, have we reached a point that all our materiel needs are satisfied and technology is enabling us to save all the time that we used to spend on doing things that can now be offloaded to a computer and in the future robots? Just a few years ago, doing research on an idea entailed a trip to the library, now with a few clicks you can get what you want. Has mankind finally reached the place where his needs are met without the need the need to spend a lot of time and thus by extension money? if all my needs are satisfied by a lot less money then I don’t have pressure to work at a “job”. I can now focus on doing what makes me “happy” rather than focusing on what earns me “money”? Isn’t this the utopia we all dream about?

I believe we are rapidly approaching this utopia and technology is driving us there.

Our entire economic system was designed in a scarcity world. Our entire banking system is a by product of this model. Since money had value and was itself scarce, banks arose as a business to facilitate the movement of money and earn some money as well in the process. Each sovereign nation built its own currency, its own banking system to facilitate the creation and exchange of these goods in order to replicate what other sovereigns had done. Now with this utopia of the “end of scarcity” and “peak MMR” (all our day to day tasks are taken care by technology and we don’t need to spend any of our time doing meaningless things) approaching, mankind doesn’t need so much “money”. Infact the concept of money as we know it goes away. All you need is a unit of account to trade with each other to facilitate the exchange of goods. The unit of account does not need to gain or lose value, its just a unit of account. Something like a virtual credit. We need a simple, simple, system. In this utopia you only need a certain number of credits to survive and maybe the state just provides them to you (kinda like social security, but from birth). There is no need to “work” for it as its a real nominal amount since most goods are free or very very cheap. Humankind is free to pursue what it “wants” to do, music, art, science, gardening – whatever!

To truly accomplish this “virtual credit/unit of account” you need everybody in the world to be on this system. And here is where Facebook comes in. Facebook is the world’s only social utility! A unit of account is finally a social thing. You buy goods from people and from corporations that are made of people! and eventually all of them will be on Facebook! Facebook already has the infrastructure today to do this! I’m sure this is not what Mark Z set out to build, but he holds the keys to facilitate utopia right at his fingertips.

The end of scarcity is upon us and Facebook will be the new simplified bank. Utopia here we come.

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